Sapan Gai, CCO at Sovereign Metals, discusses their superior graphite test results. Watch the video here.
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Sasol....
I wonder if this has been on the cards all along, ever since Origin bought out Santos's stake.
Wet,
Well, the things that influence my thinking mostly circle around my opinion of Origin being a terrible E&P Company. I could see Macquarie as a best buyout opportunity for FOG and Origin would need to get the best talent available--which there is an abundance of right now. If Origin swallows FOG I'd be happier with a premium buyout price than ending up riding the Origin bus--which would be in no particular hurry and pretty much on the sightseeing circuit.
Darnit: Fun conversation guys while we wait for the initial test results. As to your comment "the price of FOG would be more dramatically lifted than Origin's share price" that, in fact, would be the case if a stock purchase was done with the current Origin stock. With a new issue Falcon holders simply get 22.5% (plus the adjustments for unspent carry, setting up new company, etc.) of the new company and any successful wells would accrue to all stock in the new company. In my simple mind this removes the hurdles associated with how to value Falcon's portion - it would treat Origin and Falcon interest the same - fair in my book. To repeat, it also would make a much more attractive situation for Origin to 'buy out ' Falcon than trying to acquire our interest for cash. IMO Origin is not going to want Falcon to sell their undivided interest to a third party - it would really complicate things going forward when it comes to developing acreage - another reason IMO that Origin would try to make this work to Falcon's advantage.
All just my pondering - Thanks for indulging me!
WW,
I get your point and I agree it can only work neatly for Origin and Falcon if this is spun off into a separate company for the Beetaloo E & P assets. However, I had not considered this as a potential option prior to the completion of the current farm out commitments. On reflection, this would make even more sense for all concerned and would provide a cash out option for Falcon shareholders wishing to exit and an option for others to stay the course for the E & P development.
By controlling the entire acreage, it would give Origin more flexibility to disperse or sell part of the acreage to fund the development of this massive project.
I am hoping we get some good news on the Kyalla flow rates in the week ahead to add further fuel to these thoughts !
GLA
IMVHO, FOG's stake will be snapped up by a major player who unlike FOG has access to liquid investment capital to finance Beetaloo's development. I don't believe FOG itself will be taken out but that would leave FOG with a huge cash balance with a special dividend being paid to shareholders
capex at Beetaloo will be huge. there is no way FOG will be able to raise the funding for such a development
Wet,
Perhaps, but I would rather see some more holes punched and tested as the price of FOG would be more dramatically lifted than Origin's share price, and it seems to me I'd rather see a higher price for FOG when it came time to figure the conversion.
Shalamar: "However, I do not believe this could happen before the final 2 or 3 wells (depending ) are completed as to sell sooner could seriously undervalue our shares / share swap."
I think you are missing the whole point of what I am suggesting - if a new Origin E&P company were established and Origin/Falcon's interest in the Beetaloo was spun off into it then it wouldn't make any difference when the final wells of the carry were drilled (other than making an adjustment in shares for Origin's unspent carry). The stock value at the time of the initial transaction would be whatever value the market assigned to the existing assets (drilled and undrilled). As the final wells are drilled then the market would value that production/proven acreage into the stock price of the new company. IMO, Origin needs to set up a new E&P company for this to work properly for the stockholders of Origin and Falcon - there needs to be a clean slate which in my opinion would benefit both Origin and Falcon.
The more I think about this the better I like the idea of a stock acquisition for Falcon - there is no need for expensive appraisal reports and haggling over how to assign values to unproven acreage (i.e Amungee Velkerri B). It lets those of us willing to hang around the huge upside potential - for those wanting to exit can do so at their own timing. I will be watching for actions by Origin/Falcon that fit into this scenario.
Hey everyone... Thanks for all the info and speculation. I does a heart good to dream! Keep the whispers coming. I have no "boots on the ground" nor anyone to call for information... YOU ALL are my source! LOL PLEASE keep it coming. I look forward to the daily ebb and flow of ideas and such! BE BLESSED & GLTA
RTW
In my opinion the Beetaloo is too big for Org or a new Org+Fog company to digest this unconventional shale, condensate, gas field, because you will need very deep pockets to drill, stimulate thousands of wells and to transport the gas and condensate to Darwin for export. The financing of Capex and Opex will sum up to many billion dollars before you can earn serious money.. The big advantage for the buyer. After the first wells the Beetaloo will be derisked . That means the investor(s) will not have to pay for expensive, risky exploration anymore, because the Beetaloo is becoming a development play with proved reserves and resources with the current drilling and the next wells to be drilled and tested.
I think the owners of the LNG export facilities in Darwin should have the highest motivation to swallow and digest our little bird or another big player like one of the big state owned international companies that plan to import (more) gas from Australia to their own country or a mayor that needs to replace gase reserves for the balance sheet.
Shalamar said "However, I do not believe this could happen before the final 2 or 3 wells (depending ) are completed as to sell sooner could seriously undervalue our shares / share swap."
The shares in the new company would go up commensurate to results so it'd be 6 or 2 x 3s whether we were invested in Falcon or Origin.
WW
I too am hearing the same very good vibes from my sources and I am expecting the flow rate results in the next week.
In "pondering the possibilities" you referred to, I believe this makes perfect sense from an origin perspective to take control of the entire permitted areas with limited capital outlay through a stock issue/ swap with Falcon stock. However, I do not believe this could happen before the final 2 or 3 wells (depending ) are completed as to sell sooner could seriously undervalue our shares / share swap.
I am contemplating the week ahead and I hope the whispers I am hearing are reflected in the overdue flow rate results.
ATB
Many thanks for the responses. Much to ponder!
Oh, and as you can't edit messages, further to my last one, I think it's more likely that Origin WOULD form a new company for the Beetaloo because it's "cleaner" and less complicated that way and they're not currently listed on the UK stock exchange anyway so I figure it'd be easier doing so with a brand new company.
Only question remains is what about the Karoo (or even the Mako Trough)? They might be worth something one day so would Falcon still retain them or would Origin take them as a free bonus?
The more I think about it, the more I like your solution, Wet, and hope it comes to pass. It never made sense to me to think of Philip saying the company would be sold by April (if indeed he did say that) when we wouldn't be finished drilling under the terms of the agreement with Origin. But this way it doesn't matter, because in a way we still achieve his stated aim of proving up the entire area, but leaving him free to take up other job offers. Jokes about his golfing aside, he's not much more of a figurehead nowadays and there can't be a lot of satisfaction in that. This way he achieves what he set out to do and can move on to a new challenge.
Stebol, I think if we got shares rather than cash, a deal with Origin would end up being worth more than any bidder would be prepared to pay at this stage. I also see Philip and Origin as decent people and I think Philip would want to make life easier for Origin by selling to them rather than an outsider - provided the deal was good enough obviously.
I think I've answered my own question about how an influx of Origin shares would affect ISA accounts in the UK. Because it would be a straight swap of shares in our brokerage accounts without us being involved in the transaction, there'd be no tax implications.
Stebol: This is all just a guess on my part. Origin has basically sold off all of its E&P other than the Beetaloo. Origin's base business is energy production and utility sales (electricity). If Origin was to spin off the Beetaloo assets into a new entity then I'm thinking Falcon would be assigned an approximate 22.5% of the new entity's stock. Any new development debt would follow this new entity. Likewise any revenue (block sales/farmouts) would benefit the new stock. I'm sure this is an oversimplification of the structure but IMO it cleans up the undivided interest mess and would also clean up Origin books by splitting out the Oil & Gas E&P from their utility business. I would love to participate in something like this if it were available. You wouldn't have the overhang/burden of Origin's current business model - it would be strictly an E&P play in a World Class Discovery on steroids.
If the Beetaloo was spun intact into a new company then there would be no evaluation issues for current Falcon holders - one would just get their prorated share of 22.5% based on their current stock ownership of Falcon. In my mind it would not make any difference as to when a deal of this nature was done - any exceptional flow test such as the Kyalla #117 or the upcoming stage 3 wells would translate into an increase in value to both Origin's current 77.5% and Falcon's 22.5%. There would have to be some type of adjustment for unspent carry due Falcon but that would be adjusted into the final percentage allocation of the new company.
Newtofo: Certainly not a tax person but I'm thinking there would be no taxable gains on an exchange of this type. Taxes would be computed on any realized gain/loss over the initial evaluation of the new Origin stock when it was sold. Like I said I'm sure it's not that simple but I would think it could follow that general model.
This is all just conjecture on my part but it does seem to be a nice solution for Origin/Falcon shareholders.
I certainly wouldn't be averse to a deal involving Origin shares but I don't see it as being on the cards just yet.
A lot will depend on the results of the 90 day test but, in terms of achieving a fair price, then surely you would want multiple bidders? A positive Kyalla outcome should have them chomping at the bit for our 22.5%.
There are one or two out there with big enough pockets who could also foot their share of development costs.
Wet, your theory would tie in with the recent rumour out of a Dublin broker's which was that Philip had said the company would be sold by next April. If you're correct then they've already agreed a deal in principle and will await the results of the 90-day flow test before hammering out the fine details.
Does anyone in the UK know how this would affect our ISA holdings if the value of the Origin shares exceeded the annual limit of £20k? If we acquired our Falcon shares under the terms of the ISA it doesn't seem fair that we couldn't have the full quantity of the Origin shares in the ISA too. Having said that, fair and tax laws are a bit of an oxymoron!!
Hey Wet, an interesting post -- particularly the idea of Origin just using their stock to buy out Falcon's interest. This would be the best of both worlds for Origin and Falcon with no cash required by Origin and more of blue chip holding for Falcon shareholders. Not too sure of the tax implications -- but do think that if done correctly the taxes could be less for all involved until Origin shares are sold??
From just the farm-out perspective -- Origin can go ahead on that front at anytime under the new agreement signed in the Spring. However, it would makes sense that any kind of a spinoff of the Beetaloo into a totally separate corporate entity would be much easier if Falcon's shares were absorbed back into Origin ahead of time.
PS -- it wasn't necessarily hysteria that was driving my earlier post (hasn't gotten that far just "yet" -- LOL), but was hoping to see something like Orson's reassuring post while we wait..............
Speaking of pondering the possibilities I want to revisit Falcon's 'undivided interest' in the Beetaloo. I have always viewed this ownership as a messy situation for both Falcon and Origin. The most logical way out of this situation would be for Origin to buy out Falcon's interest - putting the concession back together and then moving development forward.
Now ponder this - What if Origin was to make a stock offer for Falcon's 22.5%. Origin could then potentially spinout the Beetaloo into a new E&P company or less desirably keep it under the existing energy company. They could then sell off or farm out blocks of acreage to fund the Beetaloo's continued appraisal/development. The beauty of this is those wanting out of Falcon could sell their newly acquired Origin stock and continue to hold interest in the drilling/development of this World Class field. I'm not a tax-expert but taxes might possibly be deferred? I have always heard that Falcon could be a $10 stock if only it could continue in the development of these assets. A stock buyout by Origin would give those willing to hang around longer a great way to realize the huge potential of this field.
Origin/Falcon's concession is so big it will take multiple large companies many years to develop the acreage. As Origin proves up acreage it could sell off blocks limiting debt burden - allowing its stock value to appreciate at a quicker pace.
A setup like this would allow Origin to put the Beetaloo interest back together and fund large portions of their own E&P while letting Falcon shareholder's participate more in the upside of this tremendous asset - a WIN WIN in my book. Above my paygrade but I would assume Origin would offer Falcon a sweeter deal in a stock offer than a cash offer. The Permian Basin has just seen two big stock acquisitions this month ( Pioneer acquired Parker & Parsley $4.5B; Conoco acquired Concho $9.5B). Maybe Origin acquires Falcon for $?B :^)
Just some crazy thoughts while trying to practice patience while awaiting the Kyalla news.
Thoughts??
Thanks OrsonM for helping to quell the hysteria trying to raise its head. I'm hearing this is a nice well - how nice - we will just have to wait and see. IMO we are within a week of an NR but as you mentioned no-one has a firm handle on that timeline. The Kyalla is out in the middle of friggin no-where - things do take longer. Patience all! Origin/Falcon will let us know when the initial flow rates are established - in the meantime ponder the possibilities!
Thanks Orson,
While two weeks seems like a long time to wait -- twelve years is probably a bit longer, but it doesn't feel longer right now -- LOL.
Couple quick comments - it could very likely be a good thing that no news has been released as it is quite possible rates are still climbing and why an IP has not yet been captured.
Also, while the Amungee well was right off the highway, the Kyalla well is not. It actually sits more in the middle of the Hayfield station, and would not be as easily seen.
I'd say within 2 more weeks is still a very reasonable amount of time to get news without worrying about it. And who knows with this crew. They may wait to provide a 30-day flow rate as the first piece of news.
Or it could all be going to h-e-double hockey stick........
Is it possible the news and flaring was rushed slightly , because of the imminent moratorium , just a thought .
JFH
Darnitagain etal-
In addition to my comment to you below, I would add POQ has in my opinion been told to go work on his golf game and let the professionals do the hard work of determining the next steps in the important project for both Origin and Falcon. This is not amateur hour and keeping POQ from commenting is evident and reduces the stock's wild swings. It seem the recent Sweetpea transaction was most probably a legal motion to move a step forward to something, which I have no idea. However, the shares continue to trade as if the referee continues as his has i.e. sell as he can to liquidate the estate. POODS